6 Signs You Are Smarter About Money Than You Were 5 Years Ago
6 Signs You Are Smarter About Money Than You Were 5 Years Ago
John Csiszar Wed, April 17, 2024
The coronavirus pandemic of 2020 changed many things about the world, including how people look at and manage their money. According to a new GOBankingRates study, 74% of people said they were smarter about money since the pandemic began, a perhaps unexpected benefit of the global calamity.
If the survey results are truly representative, they mean it’s likely that you are also smarter about money than you were five years ago. Here are some of the signs that you’re doing the right things with your money and are moving towards a more prosperous financial life.
You Have Built a Sizable Emergency Fund
Approximately 22% of Americans have no emergency funds at all and only 44% could pay a $1,000 expense with their savings, according to a 2024 Bankrate report. If you find that you have a sizable emergency fund, especially if you didn’t have one before the pandemic, it means you’re smarter about money now.
Most financial experts suggest having at least three to six months of expenses saved in an emergency fund or as much as one year if your income is erratic or inconsistent.
You Paid Off (or at Least Lowered) Your Debt
From April 2020 to December 2021, throughout the heart of the pandemic, the percentage of households carrying credit card balances actually fell from 50% to 45%. This was due in large part to the unprecedented stimulus programs that put money directly into the pockets of Americans during the pandemic.
Now that those stimulus payments are a thing of the past, debt levels have once again risen, to an all-time record of $1.13 trillion. If you’ve still managed to maintain your credit card debt at a low level — or have paid it off entirely — then it’s a great sign for your finances.
You No Longer Live Paycheck to Paycheck
One of the biggest financial transformations you can make is to move beyond living paycheck to paycheck. According to a 2023 survey by Payroll.org, 78% of Americans struggle to save or invest after paying their monthly bills, thereby living paycheck to paycheck. If you can manage to crawl out of this pattern, you’re definitely ahead of the game financially.
You’ve Increased Your 401(k) Contributions
Your 401(k) plan is one of the best ways to build up a significant nest egg over your working career. In addition to the tax breaks they offer, most 401(k) plans also benefit from employer matching contributions. The maximum 401(k) contribution is also a generous $23,000 for 2024, allowing those who can afford it to sock away a substantial amount on an annual basis.
If you could contribute $23,000 to your 401(k) for 30 years and earn an 8% return, for example — not even including the effects of an employer match or an annual increase in the contribution limit — you’d have a nest egg close to $2.8 million.
You Actively Budget
To Read More:
https://www.yahoo.com/finance/news/6-signs-smarter-money-were-140015836.html